`I’m not sure if your question is rhetorical? (If it isn’t and you really do not have an understanding of the most basic concepts in economics, then suggest you take a community college course in introductory economics)
hehehe…
Dont mind me, I am just a rocket scientist by education, but doing coding/debugging to try to earn a living. Economics is a hobby (thanks to piggington).
Seriously, no, my question wasnt rhetorical, and (I think/hope) I do understand basic economics concepts.
My idea was to bring numbers (possibly hypothetical, but neverthless concrete/quantitative as opposed to vague/qualitative) into the discussion.
The discussions on inflations/deflation usually go along the lines of
It is inflation.
No, the prices are increasing.
No, the dollar supply is increasing. Real prices are same.
No, you dont understand, the credit has increased in last few years.
No, the available credit is actually shrinking.
So, then it is deflation.
Yes, but not all around, it is deflation in houses, inflation in oil and gold.
No, because the gold has fallen in terms of oil.
No, if you look at long term, it has actually increased.
No, oil was higher compared to gold a few months back.
Not really, that was a speculative bubble.
Well, gold is also in a bubble.
No, it is not.
So will the gold prices further then?
Yes, but in dollar terms.
So it is inflation.
And so it goes on and on, without much real understanding.
Throw in US house prices (Coast vs heart vs rustbelt variations), US stocks,
foreign currencies, China currency (fundamentally different from others, as its dollar peg is directly managed) etc in the discussion, and most people cant hold all that data to comprehend in totallity.
For example, look at Mish’s blog in general, or this recent thread
My point is this:
Dollar will gradually/continuously fall against real stuff.
It will fluctuate but will more or less stay on par with (other strong) currencies in general. That is, I dont expect US Dollar Index to fall to say 10 or 20 any time, ever. The other currencies will follow dollar downward to stay competetive.
I think this is what Fed and other central banks are doing right now, to get out of the current situation.
This implies world wide inflation, and the US houses and wages wont remain insulated for long, and they WILL rise.
I dont see a US-Only deflation or worldwide deflation as a possibility.
Coming to the thread topic, I see cash as the best short term bet, gold in medium term, real estate and stocks in long term.
In long term cash (no interest) will loose value, gold will hold it, and real-estate/stocks will increase.
Why ?
Gold is not productive.
Houses and stocks are productive (rent and dividends)
If you are completely in gold, what is the exit strategy ?
